Do Employee Bonuses Promote Cheating?

The recent scandal in the Department of Veterans Affairs sheds light on the role of financial bonuses in helping prompt administrators to behave unethically.

Here is the logic behind the incentive system: Reducing wait times by getting patients seen quickly is good for both patients and hospitals. So, administrators could receive financial bonuses by keeping wait times short. But the bonuses ended up motivating bad behavior. Rather than improving health care, the administrators falsified records so that wait times looked shorter on paper.

What went wrong? Incentives can lead to greater performance, but employees may be so focused on the potential of receiving them that they end up cutting corners and crossing ethical boundaries. Research by Wharton management professor Maurice Schweitzer and colleagues shows that when people are rewarded for goal achievement, they are more likely to engage in unethical behavior, such as cheating by overstating their performance, especially when they fall just short of their goals.

We all want to be good people who care about the well-being of others in addition to our own. This very likely holds true also for administrators and employees working in VA hospitals.

Yet we are often unable to behave in ways that are consistent with this desire and use all sorts of self-serving justifications to rationalize our behavior, my research shows. For instance, if we perceive goals as too difficult or even unattainable, we may use such evidence to justify our cheating. In the case of the VA scandals, the performance target required administrators to schedule appointments for primary care doctors to meet with patients within 14 days of each patient’s desired appointment date.

Given the high demand and lack of doctors, this was a standard that most administrators perceived as impossible to meet. Thus, acting unethically may have not seem that wrong to them, given that the goals were not fairly set to start with.

The ways that goals and financial incentives are set can lead most people not to follow their moral compass. Financial incentives on their own, research has shown, change our attitudes and behaviors in selfish ways.

Even merely thinking about money leads people to be less helpful and fair in their dealings with others, to be less sensitive to social rejection and to work harder toward personal goals.

In fact, money can make us so focused on our selfish motives that it can lead us to behave unethically. In my own research, I found that university students were more likely to cheat on a task after seeing 7,000 dollar bills than after seeing 24. Similarly, across a variety of studies, participants who were primed to think about money were more likely to cheat after completing a task by inflating their performance as compared with people in a control condition.

In one study, we asked college students to make as many coherent sentences as they could out of a set of words they had been presented with. In one group, some word sets were seeded with ones associated with money, such as “dollars,” “financing” and “spend” (thus priming people with the concept of money). In another group, the words were all neutral.